Life Insurance Claims Settlement Practices

One of the more important purchases a person may make during their lifetime is to purchase a life insurance policy to cover final death expenses and possibly even provide a monetary benefit to their loved ones. However, there are times when a policy goes unnoticed and unclaimed following the policyholder’s death.

In 2009, a market conduct investigation led by the Florida Office of Insurance revealed that life insurance companies were using the Social Security Administration’s Death Master File - a list of everyone who has died as reported to the U.S. Social Security Administration - to stop paying a deceased person’s annuity, but were not using the File to search for deceased life insurance policyholders in order to facilitate the payment of claims on life insurance policies. Such methods could result in insurance companies not paying the rightful beneficiary of a life insurance policy or, in the event that they are unable to locate said beneficiary, remitting the benefits to the applicable state’s unclaimed property program.

This market conduct examination revealed a larger industry practice and served as the catalyst for state insurance regulators to create a multi-state task force within the National Association of Insurance Commissioners (NAIC) to guide and coordinate the national multi-state examination process. Public hearings were held in several states that serve on the task force to probe into company business practices relating to this issue.

The results of this national investigation have caused a paradigm shift in the way the entire life insurance industry operates and is resulting in a change in protocols for how companies conduct searches to locate a beneficiary.

The states of Florida, California, Illinois, North Dakota, New Hampshire and Pennsylvania are serving as lead states for examinations of the 40 largest insurance groups, which comprise more than 92% of the market for life insurance and annuity products nationwide.

The South Carolina Department of Insurance, on behalf of the State of South Carolina, participates in the multi-state settlement agreements that are reached with these companies at the conclusion of the examinations. To date, these settlement agreements have resulted in over $173 million in claims payments directly to beneficiaries by the companies nationwide. The companies have, further, paid millions in state regulatory fines, which are distributed to participating states based on the percentage of the companies’ total premiums that are written on policies purchased in that state. All state allocations collected by the SCDOI are transferred to the State’s General Fund.

South Carolina Consumer Recovery Methods:

There are two ways life insurance companies are returning identified property and/or funds to South Carolina consumers:

1.Directly from the life insurance company through improved internal search processes imposed as part of the regulatory settlement agreements; and

2.Through the Palmetto Payback Program – the South Carolina Treasurer’s Office manages the state’s unclaimed property program. When insurance companies are unable to successfully locate a beneficiary to a life insurance policy within a specified period of time, they must remit the property to the state for safekeeping for the benefit of the rightful owner. Individuals may search the website to see if there is unclaimed property available to collect.

The following is a listing of life insurance companies that have entered into multi-state examination regulatory settlement agreements concerning the companies’ practices and procedures for identifying and paying proceeds to beneficiaries of life insurance policies and annuities. The South Carolina Department of Insurance has participated in the multi-state regulatory settlement agreement entered in to with each of the companies listed below, which are listed in alphabetical order.